European Union:
The economic order that inspires Merkel

Angela Merkel’s drive to impose discipline and sanctions in the Eurozone is not a bid to establish German hegemony, but simply an extension of the economic doctrine that provided the basis for Germany’s economic miracle: “ordoliberalism”.

Will the balance of European democracy have to be re-adjusted in the context of the current crisis? The question has been posed at a time when the sorcerors’ apprentices of European institutional engineering are once again preparing to revise community structures.

The political issue is as simple as it is crucial: budgetary discipline has become a priority, but who is to be the final authority that will act as the ‘guarantor’ of this discipline?

It is important to point out that the German government already has a significant headstart on this issue. Since September, when she announced the policy to Christian-Democrat MPs, Angela Merkel has not tired of repeating that member states’ budgetary policies should be placed under the authority of judges in Luxembourg with the power to sanction “fiscal sinners” [the compromise established on 5 December between Angela Merkel and Nicolas Sarkozy has sidelined this solution].

The much vaunted ‘golden rule’

Her direction has once again confirmed the precarious status of political legitimacy in the European Union: the credibility of the euro cannot be safeguarded by apolitical measures alone.

This is not a Bismarckian policy, as Arnaud Montebourg has so awkardly asserted, but one that is based on one of the most well-established schools of liberal thought, “ordoliberalism”, which emerged between the wars in Germany and was popularised in the postwar period as “the social market economy” by the influential Christian-Democrat Ludwig Erhard, who was Minister of Economics from 1949 to 1963 and Federal Chancellor from 1963 to 1966.

We are indebted to Michel Foucault for identifying, in his January 1979 Collège de France lecture (The birth of bio-politics), the originality of this school of liberalism, which makes constitutional regulation and judges the levers and principle guarantors of the construction of a political order founded on a strict respect for economic freedom and free competition.

In the context of ‘a politics’ that is deemed incapable of creating a stable and predictable environment for economic operators, constitutional regulation (the much vaunted ‘golden rule’) is the sole instrument to combat the “temporal incoherences” of democratic governments. And it is in this context that the German proposal to place in the hands of judges budgetary power, which is a core competency of parliament, should be evaluated.

An authentic European federalist doctrine

It is true that this school of thought is not new in Brussels. In the wake of several decades dominated by the ‘Monnet method’ which advocated entrusting the economic and political modernisation of the continent to an enlightened technocracy, we have forgotten that the European project also has roots in a judicial and economic ordoliberal credo that is still very much alive in Germany.

It is impossible to understand one of the pillars of European construction, which is the policy of free competition, without taking into account the close links maintained over many years with the milieu of German ordoliberalism. It should be said that these ideas, which justify a form of “liberal interventionism,” as one of their principle proponents, Walter Röpke, wittily remarked, provide the basis for a “strong Europe” and the reinforcement of supranational institutions: but only on the express condition that such institutions maintain an apolitical independence, along the lines the European Central Bank (ECB) or the European Court of Justice.

In short, the German proposal is much more than an ephemeral solution to an emergency situation. It is based on an authentic European federalist doctrine that aims to call a halt to the slow deployment of a democratic logic in the heart of supranational institutions, whose initial goal was economic modernisation.

As such, it would definitively put an end to repeated attempts to create a European political constitution, and pave the way for construction of an economic constitution in its stead. The question remains: is the French government so short on European ideas that the only alternative project it can propose is a modest intergovernmental solution?